THE CHINESE TAO OF BUSINESS:

THE LOGIC OF

SUCCESSFUL BUSINESS

STRATEGY

THE CHINESE TAO OF BUSINESS:

THE LOGIC OF

SUCCESSFUL BUSINESS

STRATEGY

George T. Haley Usha C. V. Haley Chin Tiong Tan

John Wiley & Sons (Asia) Pte Ltd

Copyright © 2004 by John Wiley & Sons (Asia) Pte Ltd

Published in 2004 by John Wiley & Sons (Asia) Pte Ltd 2 Clementi Loop #02-01, Singapore 129809

All rights reserved.

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We dedicate this book to those

who instructed us in the "Way":

Helen Basila Haley, James B. Haley

and Sarah Basila;

Nandini Venkatesan and Dr. C. Venkatesan;

Indira Bellare and Vasudevrao Bellare;

Khoo Loo Eng and Tan Thye Bee

'+-o CD D o +- on t nts

ACKNOWLEDGMENTS IX

ABOUT THE AUTHORS

PART 1 I THE CIVILIZATION CHASM

Chapter 1: Understanding the civilization chasm

XI

1

3

PART 2 I THE ANCESTRY OF CHINESE STRATEGY 27

Chapter 2: Economic and ethical roots of Chinese strategy 29

Chapter 3: The historical roots of Chinese strategy 49

Chapter 4: The legal roots of Chinese strategy 69

Chapter 5: The roots of the networks 89

PART 3 I EASTERN VS. WESTERN STRATEGIC PLANNING 121

Chapter 6: The components of Chinese strategy 123

Chapter 7: Evaluating Chinese strategy 167

Chapter 8: Strategically evaluating Western strategy 209

PART 4 I TRAVELLING TOWARDS STRATEGIC CONVERGENCE 243

Chapter 9: A unified model of strategic planning 245

Chapter 10: The Silk Road of strategic planning 265

ApPENDIX A List of interviewees

ApPENDIX B Bibliography

301

305

UJ +-c Ql E CJ) D Ql :5 o C

.::t. o o

GEORGE T. HALEY, USHA C. V. HALEY, AND CHIN TIONG TAN USA Be SINGAPORE JULY 2004

A book of this nature requires the support and co-operation of sev­eral people. In particular, an international group of senior manag­ers gave us considerable time and valuable insights; to these man­agers (listed in Appendix A), we extend our sincere thanks .

We owe an enormous debt, too, to the businesspeople, col­leagues and students with whom we have discussed and refined the ideas in this book. We thank them all, particularly Csaaba Soos (formerly of Artesyn Technologies) Frank-Jiirgen Richter (Director for Asia, World Economic Forum), and Indra Nooyi (President and Chief Financial Officer, Pepsico ) . Winnie Hu and Austin C. T. Hu (Deputy Chief of Mission, The World Bank Office, Beij ing) pro­vided enormous assistance for our interviews in Beij ing.

We a l s o o w e s i n c e r e t h a n k s to N i c k Wa l l w o r k , M a l a r Manoharan and David Sharp o f John Wiley & Sons Publishing. Without their faith, patient support, encouragement and occasional nagging, we would never have completed this project.

This project was funded by a grant from the Scholarly Research Grant Program of the University of Tennessee, Knoxville, and we thank Oscar Fowler and David Schumann for providing this sup­port.

Tan Poh Lin, at the Singapore Management University, provided efficient help by transcribing interviews with managers.

This book went through several iterations and required co-op­eration of numerous people across myriad time zones - in Hong Kong, China, Singapore and the USA. We owe a deep debt to our families, and heartfelt thanks to our friends and colleagues, as well as George and Usha's cats, Comet Baby and Marmalade, for eas­ing strain, making life enj oyable, and for their support and pa­tience when deadlines loomed and tempers frayed .

Finally, we o w e a n intellectual and emotional debt t o our par­ents and grandparents for showing us the Way, the foundation for a meaningful life; to our ancestors, we dedicate this book.

Q) 1:: +-+-

�authors GEORGE T. HALEY George T. Haley, Ph.D. (University of Texas at Austin), is Director of the Center for International Industry Competitiveness and Professor of Industrial Marketing and International Business at the University of New Haven where he teaches in the graduate and executive programs. He has taught on the faculties of other top universities, including the Instituto Temologico y de Estudios Superiores de Monterrey (Monterrey, Mexico), the National University of Singapore (Singapore), the Queensland University of Technology (Brisbane, Australia), Thammasat University (Bangkok, Thailand) and Harvard University (Cambridge, USA) . He has also presented seminars to academics, businesspersons and government policy makers in Vietnam, Thailand, India, Singapore, Mexico, Australia and New Zealand.

A frequent public speaker for corporate executives and government policy makers worldwide, and an award-winning author, George has over 100 books, book chapters, articles and research reports. He also wrote New Asian Emperors: The Overseas Chinese, their Strategies and

Competitive Advantages, the top-selling book on Asian business strategies worldwide in 1999, also referred to as "an important study" by the Economist.

An expert on emerging and industrial markets, including the historical, cultural and legal environments in which Chinese business strategy is formulated, George consults with several multinational companies and governments in Asia, Australia, Latin America and the USA. His expertise includes strategic forecasting and the management and auditing of technology and intellectual property in emerging markets.

He is on the Review and Advisory boards of several US and European journals including International Marketing Review, Industrial

Marketing Management, Journal of Business & Industrial Marketing,

Marketing Intelligence & Planning, and the Journal of Management

Development, where he lends his expertise on Asia and other emerging economies . Additionally, he has guest edited several journal special issues on business in emerging economies and on Internet-Based B2B Marketing.

G e o r g e ' s r e s e a r c h i s r e g u l a r l y p r o f i l e d i n t h e m e d i a including the Economist, the Fa r Eastern Economic Review, CNN,

Voice of America, the Wall Street Jou rnal , the Los Angeles Times,

F o r t u n e , C hin a B u sin e s s W e ek l y , Ma rketing N e w s a n d IndustryWeek. Some of this coverage, including research and r evi e w s f o r t h e C h in e s e Ta o of B u sin e s s is a v a i l a b l e a t www. ChineseTa o . c o m . P l e a s e c o n t a c t him at gthaley@a s i a ­p acific . com or tell fax : 212-208-2468 .

USHA c. V. HALEY Usha C . V. Haley (PhD, Stern School of Business, New York University) is Director o f the Glob a l Business C enter and a Professor of International Business in the School of Business at the University of New Haven. She has more than 100 b ooks, j ournal articles, book chapters and research presentations on international strategic management. Her latest books include New Asian Emperors: The Overseas Chinese, their Strategies and

Competitive Adva n tages ( B utterworth-Heinemann ) ; Strategic

Ma n ag e m e n t in t h e A sia P a cific: Ha r n e s sing R egio n a l a n d

Orga nizational Change for Competitive Adva ntage (Butterworth­Heinemann); Mu ltinational Corporations in Political Environments

Ethics, Values and Strategies (World Scientific); and, Asian Post-Crisis

Management: Corporate a n d Governmental Strategies for S u s tainable

Competitive Adva ntage (Macmillan / Palgrave) . S h e h a s t a u g h t I n t e r n a t i o n a l B u s i n e s s a n d S t r a t e g i c

M a n a g e m e n t a t m aj o r u n i v e r s i t i e s i n t h e U n i t e d S t a t e s ( including Harvard University) , Singapore ( a t the N a tional University of Singap ore ) , Australia (at the Australian National U n i v e r s i ty ) , and M e x i c o ( a t I T E S M , M o n t e r r e y C a m p u s ) . Additionally, she has taught in maj or corporate, governmental and universities ' executive-development programs, for top and m i d d l e m a n a g e r s and p ol i c y m a k e r s , in the United States, Australia, Russia, Mexico, Hungary, V ietnam, Italy, Finland, India and Singapore . She also consults on strategic management a n d f o r e i g n d i r e c t i n v e s t m e n t f o r s e v e r a l m u l t i n a t i o n a l corporations i n North America, Australia, Europe a n d Asia,

s i t s o n s i x j o u r n a l e d i t o r i a l b o a r d s , i n c l u d i n g Jo u r n a l of

I n tern a t i o n a l Ma n ageme n t , Jo u rn a l of Orga n iza t i o n a l Cha nge

Management, Ma nagement Decis ion, Asia Pacific B u s iness Review

and Jou rnal of B u s iness Strategy, and serves as Regional Editor (Asia Pacific ) for two academic j ournals .

An expert on the multinational corporation and international strategic management, especially in Asian and emerging markets, Usha's research on China and the Asia Pacific has been regularly covered in the media and business publications including the Wall

Street Jou rnal, Wall Street Journal (Europe), Forbes, the Economist,

Barron's, Red Herring, the San Francisco Chronicle, the Salt Lake City

Tribune, CNN, PB S's WideAngle, Voice of America, Asahi Shimbun, The

China Post, The Australian, the Sydney Morning Herald, The Hindustan

Times, The Guardian, The South China Morning Post, China Business

Weekly, and several others . Some of this coverage, including r e v i e w s of T h e C h i n e s e Ta o of B u s i n e s s , may be v i e w e d at www.ChineseTao.com.

In 2 003, Usha received a Life-time Achievement Award in M a n a g e m e n t f r o m the L i t e r a t i C lub ( U K ) a n d a p an e l o f b u s i n e s s p e r s o n s , p o l i c y m a k e r s a n d a c a d e m i c s , f o r h e r c ontributions t o t h e understanding o f business i n the Asia Pacific. She currently sits on two company and governmental boards and is listed in Who's Who in America, Who's Who in the

World, Who's Who of American Women and Who's Who in American

Education. Please contact her at uhaley@asia-pacifi c . com or tell fax: 212-208-2468.